If the Interest Rates in a Country Are Higher Relative

question 38

Multiple Choice

If the interest rates in a country are higher relative to interest rates in other countries,the short-term and long-term effects on the value of the currency of that country are:

• A)the same,since interest rates do not affect currency values.
• B)the same,since the central bank of the country will lower interest rates so that interest rates will not affect currency value.
• C)the value of the currency will increase as capital flows into the country to take advantage of the higher interest rates,but the value of the currency will decline when investors withdraw their funds from that country.
• D)the value of the currency will decrease as confidence in the country's currency suffers,but the value of the currency will eventually rise as confidence is restored.

---

Definitions:

Autonomic Nervous System

A part of the peripheral nervous system responsible for regulating involuntary body functions, like heartbeat, blood flow, breathing, and digestion.

Energy Stores

The various forms in which energy can be kept or held, including chemical, mechanical, thermal, and nuclear, among others, within a physical system.

Sympathetic Nervous System

A part of the autonomic nervous system that activates what is often termed the fight or flight response, preparing the body for rapid action in response to threats.

Internal Organs

Vital parts within the body, such as the heart, lungs, and liver, that perform essential functions required for survival.